A reverse mortgage is equivalent to taking a loan out against your home. It is something that is increasing in popularity among the elderly as a way to boost their fixed income and/or enjoy their retirement. Again, it’s a lot like a loan with your home as collateral. Only, unlike typical home loans, you don’t have to pay that loan back.
Justin Smith, mortgage broker at Rockingham’s Mortgage Gallery (and also the mortgage brokers in his Kwinana, Cockburn and Baldivis), would like to ask you: What does that mean to you as a property owner? What does that mean to your family?
Read on for some information that would prove helpful.
- Equity from your home is used to fund a loan, therefore people need to have equity to qualify. The value and equity of your home, as well as your age will dictate how much money you are entitled to.
- Reverse mortgages do charge interest–sometimes hefty interest fees–but you don’t have to pay this through a monthly mode. Instead, it’s added onto a loan that becomes due when the home sells, when you die, or when you move into a retirement home. This can give you a loan without the burden of payments.
- Reverse mortgages don’t have to be taken in one lump sum. They can also be taken as a regular income. This could be a way to boost your monthly fixed income. Be aware, though, that depending on how much you receive, they could also impact how much of a fixed income you qualify to receive.
- The decision to take a reverse mortgage is something you may want to discuss with your children as this will impact any inheritance they may expect to receive after you die. If any of your kids live with you, they will have to move out once you die as the home will be sold.
- If your home appreciates in value, the reserve mortgage lender may benefit more than you will, so it’s important to be informed about the details of your specific contract.
There’s a lot to know about getting a reverse mortgage. It’s wise to do some research like you have done here, but it’s also wise to talk to experts before making a decision. We would be happy to help you navigate this process and help you make a decision that’s right for you. Once you get information you should also know there’s a cooling off period to help you, should you change your mind. If you have questions about reverse mortgage or personal finance, Justin Smith, mortgage broker at Rockingham’s Mortgage Gallery (and also his offices in Kwinana, Cockburn and Baldivis) would be happy to discuss your options with you.